Daily Market Notes August 11

PSEi 5,263.35    +6.74   (0.00%)
TURNOVER 4.65B

Trading in a Quagmire of Uncertainty

I got a lot of questions this week, in and out of FM on why the market seems so strong, and yet so very weak at the same time.

First things first
1) Cheap cost of money globally. Interest rates are at an all time low, and the local Bangko Sentral even lowered rates a few weeks ago. All the more reason that liquidity should force investors to stay OUT of the banking system and some, of not most, should be risked into the equities markets.

2)Tug of war. So you have Liquidity on one end, joined by continuous credit upgrades for the country for a stronger fiscal position, and on one end of the rope you have a rally that seems all rallied out.

That is where it is getting tricky. The same wall of worries has the bears arguing that we have rallied too much, and at about 16x market P/E compared to the others, we are not too cheap anymore. ON the other side of the wall, bull-lievers argue that before the Asian crisis of 1997, the local market’s P/E ratio hit a high of 20x.

And then there’s Europe, which would not be so easily solved.

Let’s skip the Europe angle and bolt straight to what I think. I think we should embrace the volatility, and expect the market to behave erratically with a bias upwards in the big picture. That means we can go down 100, 200, and I believe we can still bounce back from that. We can still even go down 500 points and be considered within a healthy uptrend. All of these, in my book, can still make for a healthy bias upside, compounded with extreme volatility, but this outlook stays only until about March – April 2013.

Having said that, mining stocks and stocks being investigated will continue to stay out of favor. The latter, self-explanatory, the former, not too hopeless, but something more of a prolonged wait. Call it Noynoying if you will. For until the legislators enact a law that will enforce the government’s bigger share of the pie, nothing will move the mining conveyor belt.

FOREIGN BUYING Php 2,327,322,826.3
FOREIGN SELLING Php 2,681,301,980.91

We are still plagued by 350M nfs. This time, 311m of that was from MBT. It was the banking sector that was noticeably weak, as the other big banking stock wae NFS as well: BDO 51M pesos.

and of course, number 3) global markets are all as skeptic as ever, as big brother Dow has approached 13k, and the S&P hitting 1400. Most important round figure resistance levels to be feared if held, and yet to be welcomed if broken out from. People want to sell ahead of any expected correction, and don’t want to follow buying higher, but instead want to sell on each rally.

 

LEGEND:
NFB : Net Foreign Buying
NFS : Net Foreign Selling
PHP : Philippine pesos

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